Question

Plaid Manufacturing Co. produces two products: G1 and M1. The company uses an activity based costing system. The following are the activities, budgeted total cost and cost drivers per activity for the year 20x9:

Activity	Budgeted Cost	Cost Base	Cost Base Volume
Assembly	$864585	# of DL hours	36772
Inspection	$664181	# of units	20927
Shipping	$349574	# of batches	189

Plaid Manufacturing has budgeted to produce 3,000 units of G1. G1 is manufactured in batches of 73 units and requires 16196 hours of direct labour.

What is the overhead cost per unit for product G1?

Select one:

a. $203.68

b. $626.11

c. $153.04

d. $184.01

Question 3

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Question text

Barker Inc. has identified the following overhead costs and cost drivers fore the upcoming year:

Overhead Item	Expected Cost		Cost Driver	Expected Quantity
Setup costs	$191997		Number of setups	451
Ordering costs	117974		Number of orders	3162
Maintenance	354369		Machine hours	3677
Power	49146		Kilowatt hours	91356

The following are two of the jobs completed during the year:

		Job 400	Job 401
	Direct materials	$854	$1535
	Direct labour	$689	$2850
	Direct labour hours	48	66
	Number of setups	2	5
	Number of orders	5	4
	Machine hours	19	26
	Kilowatt hours	28	52

The company’s normal activity is 4003 direct labour hours.

If Barker used activity based costing, the total cost of Job 401 would be:

Select one:

a. $ 9197

b. $ 6663

c. $ 9019

d. $ 9169

Answer 1

Question 1

Correct answer--------------a. $203.68

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Assembly	Number of DL hour	$     8,64,585.00	36772	$             23.51	Per DL hour
Inspection	Number of unit	$     6,64,181.00	20927	$             31.74	Per unit
Shipping	Number of batch	$     3,49,574.00	189	$       1,849.60	Per batch

.

Cost assigned to G1
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Assembly	$           23.51	16,196.00	$      3,80,801.12
Inspection	$           31.74	3,000.00	$         95,213.98
Shipping	$     1,849.60	73.00	$      1,35,020.65
Total Overheads assigned			$      6,11,035.74
Production			3,000.00
Overhead cost per unit			$ 203.68

Question 2

Correct answer--------------a. $ 9197

Working

Direct material	$                    1,535
Direct labor	$                    2,850
Overheads	$                    4,812
Total Cost	$                    9,197

.

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Setup cost	Number of setup	$     1,91,997.00	451	$          425.71	Per setup
Ordering cost	Number of order	$     1,17,974.00	3162	$             37.31	Per order
Maintenance	Number of Machine hour	$     3,54,369.00	3677	$             96.37	Per Machine hour
power	Number of Kilowatt hour	$        49,146.00	91356	$               0.54	Per Kilowatt hour

.

Cost assigned to Job 401
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Setup cost	$        425.71	5.00	$           2,128.57
Ordering cost	$           37.31	4.00	$              149.24
Maintenance	$           96.37	26.00	$           2,505.74
power	$             0.54	52.00	$ 27.97
Total Overheads assigned			$           4,811.52